Vardhman Textiles Ltd (VTL) a Punjab based major integrated textile producer in India to cope up with the persistent volatility in cotton prices has started hedging on Multi Commodity Exchange of India Ltd. (MCX).
It is of vital importance for VTL to hedge cotton prices, as it constitutes more than 4 percent of the country’s yarn production capacity. They believe that hedging the cotton prices will help VTL to maintain its margins.
Cotton is the basic raw material for the textile industries. Its prices are influenced by both domestic and international factors, particularly with the growing globalization and international trade.
During October 2016 to September 2017, cotton prices witnessed volatility of 19.25 percent (annualised) and with physical market size of cotton estimated at around Rs68,000cr, the cotton industry faced annualised price risk of over Rs13,000cr.
In Q3FY18, VTL’s revenue mix consisted of 95percent and 5 percent from Textile and Acrylic Fibre respectively. VTL is also the second largest producer of sewing threads and the market leader in hand knitting yarn in India.
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